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Deviating away from the Streaming Wars series a little bit. I have been brainstorming a long time about this upcoming post and Addinator wrote a great post that had some items I wanted to write about here that's worth a read: WSO: Netflix Cutting the Cord

Anyways, here is the interesting news of the day:
Yale Suing Former Students

Schools are now suing students for their inability to pay back loans. All I can say is: W O W. I don't think this will hurt the reputation of the schools by any means (will it?) but way to hit those students that already can't afford to pay back the minimum payments each month over even more.

I took out about $15k in loans while doing work-study when I was in school. Have paid off $12k, including the loans with the highest interest rate. The $3k I have left is at 2% variable at the moment so I am in no rush to pay it all off just yet, even though I could. This hits very close to home for me, as I understood the struggle having to pay and work for school. Fortunately I found a position at a boutique bank that helped me pay off a significant portion. I cannot imagine if I get sued on top of working a miserable job out of college (or even worse, unemployed). My confidence would be destroyed, and what option would I have but to either 1) beg and borrow from friends and company or 2) declare bankruptcy which wouldn't even solve the issue or 3) find high interest loan sharks.

Ugh.

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Comments (37)

  • cakepie's picture

    I don't get it. I thought Yale had a big enough endowment that you can pretty much go for free if you have a low enough EFC. Why would they need or want to sue?

  • BTbanker's picture

    I never got loans, so excuse my ignorance, but doesn't the loan originator (govt, bank, etc.) pay the bill upfront like a mortgage, then the student pay the originator back? Why would the schools be missing their money?

    EDIT: nvm, I didn't even know schools lent their own money.

  • TNA's picture

    I read that article today. People are defaulting on like $5-10K in debt. Totally retarded.

  • In reply to TNA
    West Coast Analyst's picture

    TNA:
    I read that article today. People are defaulting on like $5-10K in debt. Totally retarded.

    Yea defaulting on those loans aren't exactly the smartest moves these guys made, which puts into question the education they did receive at these brand name schools!!! Common sense, not so common.

  • In reply to BTbanker
    West Coast Analyst's picture

    BTbanker:
    I never got loans, so excuse my ignorance, but doesn't the loan originator (govt, bank, etc.) pay the bill upfront like a mortgage, then the student pay the originator back? Why would the schools be missing their money?

    EDIT: nvm, I didn't even know schools lent their own money.

    Haha yea so you figured it out! The schools generally can loan on a need-basis, so sometimes it's better to take loans out from them instead of a private lender, such as BofA.

  • In reply to West Coast Analyst
    BTbanker's picture

    West Coast Analyst:
    BTbanker:
    I never got loans, so excuse my ignorance, but doesn't the loan originator (govt, bank, etc.) pay the bill upfront like a mortgage, then the student pay the originator back? Why would the schools be missing their money?

    EDIT: nvm, I didn't even know schools lent their own money.

    Haha yea so you figured it out! The schools generally can loan on a need-basis, so sometimes it's better to take loans out from them instead of a private lender, such as BofA.


    I'm wondering why schools like Yale don't just give scholarships to those kids. I mean, it's not like they even need tuition money.
  • West Coast rainmaker's picture

    I might understand students at Sarah Lawrence, Hampshire, etc. sued. Clearly those college do not provide $50 - $60k a year of value, and their graduates have questionable employment prospects. I still wouldn't support the lawsuits - if you borrow money as an adult, you should be responsible for paying back - but I could see the rationale.

    These schools have excellent financial aid. And they provide the path to excellent jobs. If you cannot pay back your loans after attending Yale or UPenn, it is probably your fault. Unless you suffered some extraordinary hardship (in which case you should talk to the bank/school), you should be able to make the payments.

    This is why I hate the idea of further subsidizing student loans. The government isn't doing these students any favors. So what if the 200k in debt you incurred for an art degree only accrues interest at 3.5%? The degree wasn't worth it in the first place. Ideally we would let interest rates float according to likelihood of repayment. The engineering or accounting student with strong grades might get a loan at 3%...but that 3.0 GPA art major is going to be paying 15%+.

  • TNA's picture

    Allow student loans to be discharged through bankruptcy and only provide student loans at a level of whatever the cheapest state school would be. We shouldn't be writing a blank check and having limits on borrowing would force realistic choices to be made.

  • NorthSider's picture

    Let the private market handle student loans and you would have college costs come back to reality and start driving students into degree plans that actually add value.

    Mind you, I am very much pro-liberal arts, but that's a second major, not something that's worth spending $50k/yr on.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to TNA
    IlliniProgrammer's picture

    TNA:
    Allow student loans to be discharged through bankruptcy and only provide student loans at a level of whatever the cheapest state school would be. We shouldn't be writing a blank check and having limits on borrowing would force realistic choices to be made.

    ***Through bankruptcy seven years after their exiting school, or whenever the interest begins.

    Students should not be allowed to declare BK the moment after graduation, two months before they go off to work for JP Morgan.

    Also, we need to go back to the old state school system of Engineering tuition costing about $1500/semester, inflation-adjusted. It used to be that you could work your way through school while earning minimum wage.

  • In reply to cakepie
    hopingtobreakin's picture

    cakepie:
    I don't get it. I thought Yale had a big enough endowment that you can pretty much go for free if you have a low enough EFC. Why would they need or want to sue?

    The deal with some scholarhsip/tuition programs depend on the size and income of your family. It doesn't actually account for expenses of families. For example a family of 4 with $200k in household income will probably get no assistance whatsoever. However, that family might have a kid/parent with serious medical issues or multiple kids in schools, etc.

    In addition, I'm guessing the loans might have been for students that graduated before the more generous tuition offers.

  • In reply to NorthSider
    Ron Paul's picture

    NorthSider:
    Let the private market handle student loans and you would have college costs come back to reality and start driving students into degree plans that actually add value.

    This is insane. We can't afford NOT to educate our populace!
  • In reply to TNA
    DCDepository's picture

    TNA:
    Allow student loans to be discharged through bankruptcy and only provide student loans at a level of whatever the cheapest state school would be. We shouldn't be writing a blank check and having limits on borrowing would force realistic choices to be made.

    This. This. A thousand times this. It's simple mathematics. If a lender knows that student debt can be discharged in bankruptcy, then the lender will act rationally and limit its loans to those who have legitimate prospects of repayment (i.e. doctors, engineers, architects, etc.).

  • In reply to Ron Paul
    NorthSider's picture

    Ron Paul:
    NorthSider:
    Let the private market handle student loans and you would have college costs come back to reality and start driving students into degree plans that actually add value.

    This is insane. We can't afford NOT to educate our populace!

    Do you honestly believe that schools would just stop accepting students because the government sliced its subsidies on post-secondary education? You probably also believe that college is fairly priced right now?

    In the absence of subsidies, colleges would be forced to charge reasonable sums for tuition rather than the egregious price tags of many private schools today. Furthermore, a huge percentage of the money we spend subsidizing college goes to two-year schools and for-profit four-year colleges that add very little value to students (there are some exceptions, but there can be no doubt that these industries are vastly oversubsidized). More importantly, any reputable college provides need-based financial assistance to its applicants.

    Reforming educational subsidies would force schools to stop sitting on their asses and start thinking about running a school geared towards teaching students efficiently rather than spending its time managing the enormous hedge funds they euphemistically deem "endowments". Moreover, it would force students to think twice about that art history major. People with skin in the game are the only ones who are able to make the determination re: is getting a college degree worth it for this person.

    Entrepreneurs like Peter Thiel are aggressively marketing against college. I think there's a strong point here. We have WAY too many people going to college these days. Meanwhile, the value of a college education is being diluted both in practical terms (your diploma is worth less when more people have them) and in educational terms (grade inflation has turned even top-notch schools into degree factories). Nevertheless, we seem brainwashed into believing that sending our youth into four additional years of schools is something we "can't afford not to do". I'm skeptical.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to DCDepository
    NorthSider's picture

    DCDepository:
    TNA:
    Allow student loans to be discharged through bankruptcy and only provide student loans at a level of whatever the cheapest state school would be. We shouldn't be writing a blank check and having limits on borrowing would force realistic choices to be made.

    This. This. A thousand times this. It's simple mathematics. If a lender knows that student debt can be discharged in bankruptcy, then the lender will act rationally and limit its loans to those who have legitimate prospects of repayment (i.e. doctors, engineers, architects, etc.).

    Not if that lender is backed by the full faith and credit of the US Government.

    EDIT: I agree with you though, what we need is lenders to be responsible for judging the value of college. But we only get that when we espouse a more privatized solution.

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to NorthSider
    DCDepository's picture

    NorthSider:
    DCDepository:
    TNA:
    Allow student loans to be discharged through bankruptcy and only provide student loans at a level of whatever the cheapest state school would be. We shouldn't be writing a blank check and having limits on borrowing would force realistic choices to be made.

    This. This. A thousand times this. It's simple mathematics. If a lender knows that student debt can be discharged in bankruptcy, then the lender will act rationally and limit its loans to those who have legitimate prospects of repayment (i.e. doctors, engineers, architects, etc.).

    Not if that lender is backed by the full faith and credit of the US Government.

    EDIT: I agree with you though, what we need is lenders to be responsible for judging the value of college. But we only get that when we espouse a more privatized solution.

    Agree. We're pretty far away from the ideal right now in student lending.

  • blackrainn's picture

    "Federal law requires that Yale attempt to collect unpaid Perkins money, Tom Conroy, a university spokesman, said in an e- mail. Accounts must be at least 120 days past due before being referred to a collection agency, he said."

    These loans seem like a pittance in the scheme of things. The real kids we have to worry about are those taking out $70,000 to get a history degree at a low ranked liberal arts college.

  • Zafrynex's picture

    Seems like socialist France has some benefits...
    Top engineering/science school are completely free, just some 500$ /year to pay printing/various services.
    Business schools around 6k/year

  • In reply to Zafrynex
    TNA's picture

    Zafrynex:
    Seems like socialist France has some benefits...
    Top engineering/science school are completely free, just some 500$ /year to pay printing/various services.
    Business schools around 6k/year

    Not free. Just paid for by others through exorbitant taxes. And considering the level of youth unemployment in Europe I don't see the benefit of everyone having a degree paid for by someone else.

  • In reply to Zafrynex
    bonks's picture

    Zafrynex:
    Seems like socialist France has some benefits...
    Top engineering/science school are completely free, just some 500$ /year to pay printing/various services.
    Business schools around 6k/year

    I know what you mean. I had a Spanish roommate this summer and spent a lot of time with his European crew. All of them had scholarships--tuition paid through agreements between universities, housing and food covered above and beyond what was needed. You should have seen the digs the Norwegian could afford. Having said that, they were all STEM majors and the Spaniard got fucked with payment cuts that shortened the time he could spend over here.

    Must be nice, but that's not to say that we should head in that direction.

    Nothing short of everything will really do.

  • In reply to bonks
    DCDepository's picture

    bonks:
    Zafrynex:
    Seems like socialist France has some benefits...
    Top engineering/science school are completely free, just some 500$ /year to pay printing/various services.
    Business schools around 6k/year

    I know what you mean. I had a Spanish roommate this summer and spent a lot of time with his European crew. All of them had scholarships--tuition paid through agreements between universities, housing and food covered above and beyond what was needed. You should have seen the digs the Norwegian could afford. Having said that, they were all STEM majors and the Spaniard got fucked with payment cuts that shortened the time he could spend over here.

    Must be nice, but that's not to say that we should head in that direction.

    Spain also has a 25% unemployment rate, is bankrupt and is nearing insolvency. As Margaret Thatcher famously said, "The problem with socialism is that eventually you run out of other people's money."

  • TNA's picture

    Socialism is a disease. This parasitic notion that you deserve what someone else earns infects a person and government.

  • In reply to DCDepository
    bonks's picture

    DCDepository:
    bonks:
    Zafrynex:
    Seems like socialist France has some benefits...
    Top engineering/science school are completely free, just some 500$ /year to pay printing/various services.
    Business schools around 6k/year

    I know what you mean. I had a Spanish roommate this summer and spent a lot of time with his European crew. All of them had scholarships--tuition paid through agreements between universities, housing and food covered above and beyond what was needed. You should have seen the digs the Norwegian could afford. Having said that, they were all STEM majors and the Spaniard got fucked with payment cuts that shortened the time he could spend over here.

    Must be nice, but that's not to say that we should head in that direction.

    Spain also has a 25% unemployment rate, is bankrupt and is nearing insolvency. As Margaret Thatcher famously said, "The problem with socialism is that eventually you run out of other people's money."

    Yeah that's why I included the last sentence. Sure is libertarian in here :-)

    Nothing short of everything will really do.

  • In reply to ghandi
    TNA's picture

    ghandi:
    Fuck loans, school should enforce wage garnishing, problem solved. If you can't find a job, they can garnish shit

    Student loans can garnish social security and disability.

  • whitecollarandsuspenders's picture

    My boy Schiff laying a smackdown on a "free education for all" knucklehead:
    http://www.youtube.com/watch?v=g3hc6LoAlu0

    "The problem with Socialism is that eventually you run out of other peoples money"

    - Margaret Thatcher

  • In reply to NorthSider
    Ron Paul's picture

    NorthSider:
    Ron Paul:
    NorthSider:
    Let the private market handle student loans and you would have college costs come back to reality and start driving students into degree plans that actually add value.

    This is insane. We can't afford NOT to educate our populace!

    Do you honestly believe that schools would just stop accepting students because the government sliced its subsidies on post-secondary education? You probably also believe that college is fairly priced right now?


    I was being sarcastic...mocking the absurdity of the "we can''t afford NOT to!" argument. As if somehow more student loans = we can "afford" things? Whatever the fuck that means?
  • In reply to Ron Paul
    NorthSider's picture

    Ron Paul:
    I was being sarcastic...mocking the absurdity of the "we can''t afford NOT to!" argument. As if somehow more student loans = we can "afford" things? Whatever the fuck that means?

    My bad, didn't catch the sarcasm (should have, judging based on your u/n).

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to TNA
    Zafrynex's picture

    TNA:

    Not free. Just paid for by others through exorbitant taxes. And considering the level of youth unemployment in Europe I don't see the benefit of everyone having a degree paid for by someone else.

    The amount of debt that US Undergrad/MBA students have to carry is just absurd. It's really pure non-sense.

    And on another note, being unemployed and debt free is still better than being unemployed with 70k$ debt lol

  • In reply to whitecollarandsuspenders
    whatwhatwhat's picture

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  • In reply to whatwhatwhat
    NorthSider's picture

    "For all the tribulations in our lives, for all the troubles that remain in the world, the decline of violence is an accomplishment we can savor, and an impetus to cherish the forces of civilization and enlightenment that made it possible."

  • In reply to whatwhatwhat
    whitecollarandsuspenders's picture

    "The problem with Socialism is that eventually you run out of other peoples money"

    - Margaret Thatcher

  • In reply to DCDepository
    Zafrynex's picture
  • In reply to Zafrynex
    DCDepository's picture